FREE ESSAY ON NUCOR

NUCOR

Previous Engagement 
Last time our consulting firm found several major points of question and recommended
solutions. Some of these recommendations were implemented with excellent success. The
first and most arduous problem we examined was of expansion. Our recommendations for
expansion were put into effect with several projects in various stages. In the past
several months, the company has announced plans to build a structural mill next to its
flat-rolled plant in Berkeley County, South Carolina; a mill for pickling and oiling,
cold rolling and galvanizing hot-rolled coils in Hickman, Arkansas, and plate mill in
Hertford County, North Carolina. The second task we dealt with was whether or not Nucor
should add another layer of management. Our second recommendation toward adding another
layer of management was also implemented. Nucor Corp. promoted two plant managers to
newly created position of executive vice president. The addition of a layer of management
is a response to the Nucor's significant growth over the past several years and signals
that it might be interested in acquiring other businesses. 
Situation Analysis
According to October issue of Wall Street Journal, the steel-makers have the capacity to
produce 869 million metric tons, or 956 million short tons, of steel annually - 15% more
than can be consumed. Even though the consumption of steel is below average, Overall
companies continue to expand production about 2% year in a losing attempt to gain profit.
Nucor Corporation is still the king of mini-mills and is currently the second largest
steel-maker in America, which produces 9.7 million tons of steel in 1999, up 15% from the
year before. Nucor has accounted for 83% of the U.S. steel industry's growth in shipments
during last decade. This is because of Nucor' s diverse product mix and low cost
structure (scrap-based, non-union mini-mill) were clear factors in Nucor's earnings
out-performance this year, and should further differentiate Nucor over the next year if
the steel market remains weak.
Despite Nucor's superior attributes and ability to generate strong earnings and free cash
flow even during trough market conditions, the share price has suffered along with all
steel equities as driven by a severe weakening in the steel cycle over the past five
months. However, we feel it is important to note that Nucor is partially insulated from
volatile steel markers owing to its steel consuming business (steel joists and decking),
which account for more than 25% of sales and even more of profits and provide the company
with geographic and product diversity. Also, the price for scrap, which account for 60%
of total cost, has continued to trend downward (along with steel pricing), which should
provide further support for margins in the next year.